Blockchain Papers

Patrick McCorry, Siamak F. Shahandashti, Feng Hao

No abstract is available for this record.

Zac Zimmer

Bitcoin, the digital cryptocurrency, has been celebrated as the future of money on the Internet. Although Bitcoin does present several forward-looking innovations, it also integrates a very old concept into its digital architecture: the mining of precious metals. Even though Bitcoin explicitly invokes mining as a metaphor and gold as an example for understanding the cryptocurrency, there has been little critical work on the connections between Bitcoin and previous metalist currency regimes. The following essay proposes a historical comparison with colonial South American silver mining and the global currency regime based on the New World silver peso it created as a way to interrogate Bitcoin. The comparison with colonial South America, and specifically the silver mining economy around the Cerro Rico de Potosí, will help to develop a historical and political understanding of Bitcoin's stakes, including questions of resources, labor, energy, and ecology. Mining and the extractive apparatus that accompanies it always imply massive-scale earthworks that reshape the planet itself, a process known as terraforming. The Potosí comparison will reveal Bitcoin to form part of a similar process of digital primitive accumulation we can provisionally name cryptoforming.

ESORICS 2017 Oslo, Joaquín García-Alfaro, Guillermo Navarro‐Arribas, Hannes Hartenstein · 7 authors

The DPM 2019 and CBT 2019 proceedings present the two ESORICS workshops on data privacy management and cryptocurrencies and blockchain technology. The papers are organized in parts on smart contracts and applications; and payment systems, privacy and mining; privacy preserving data analysis; etc.

Jason Teutsch, Sanjay Jain, Prateek Saxena

No abstract is available for this record.

Philipp Hacker, Chris Thomale

Cryptocurrencies, such as bitcoin and ethereum, have not only risen to public attention as novel means of payments, but also as facilitators of initial coin offerings (ICOs, also called token sales). In these entirely online-mediated offerings, entrepreneurs sell tokens registered on a blockchain in exchange for cryptocoins. Buyers receive tokens that can be understood as cryptographically-secured coupons which embody a bundle of rights and obligations. In July 2017, the SEC released an investigative report that highlighted that such tokens can be subject to the full scope of US securities regulation. It is unclear, however, to what extent EU securities regulation is applicable to ICOs and, particularly, whether issuers have to publish and register a prospectus in order to avoid criminal and civil prospectus liability in the EU. In conceptual terms, this depends on whether tokens are considered “securities” under the EU prospectus regulation regime. Against this background, this paper develops a nuanced approach that distinguishes between three archetypes of tokens: currency, investment, and utility tokens. It analyzes the differential implications of each of these types, and their hybrid forms, for EU securities regulation, and develops policy proposals for their regulation.

Leopoldo Catania, Stefano Grassi

From the Washington University Senior Honors Thesis Abstracts (WUSHTA), 2017. Published by the Office of Undergraduate Research. Joy Zalis Kiefer, Director of Undergraduate Research and Associate Dean in the College of Arts & Sciences; Lindsey Paunovich, Editor; Helen Human, Programs Manager and Assistant Dean in the College of Arts and Sciences Mentors: Mina Lee and Li Yang

Usman W. Chohan

No abstract is available for this record.

Yanuar Andrianto

The emergence of financial technology in the last 10 years has created a new type of asset that is Cryptocurrency. Cryptocurreny offers a small transaction fee without involving a third party in its transaction and the ability to make its users anonymous. It became one of its main selling points and was quickly accepted widely in the financial world. Cryptocurrency price movements become volatile. For examples, Bitcoin issued in 2009, the value is not more than USD 10, but in early June 2017, Bitcoin is worth about USD 3000 (Bloomberg, July 5th, 2017). Many investors are interested to invest in Cryptocurrency, especially investors with high risk tolerance. This study aims to find the effects of Cryptocurrency on well-formed portfolios. The assets we use are Foreign Currency, Commodity, Stock, and ETF. The Cryptocurrency we will use is Bitcoin, Ripple and Litecoin. Using the Modern Portfolio Theory approach, we can create an investment portfolio. The results show that the portfolio with Cryptocurrency indeed increases the effectiveness of the portfolio in two ways. The first is to minimize the standard deviation and the second is to create more allocation options for investors to choose from. The optimum allocation of Cryptocurrency is from 5% to 20% depending on the risk tolerance of the investor.

Shaen Corbet, Charles Larkin, Brian M. Lucey, Andrew Meegan · 5 authors

No abstract is available for this record.

Simon Trimborn, Mingyang Li, Wolfgang Karl Härdle

Abstract Cryptocurrencies have left the dark side of the finance universe and become an object of study for asset and portfolio management. Since they have low liquidity compared to traditional assets, one needs to take into account liquidity issues when adding them to a portfolio. We propose a Liquidity Bounded Risk-return Optimization (LIBRO) approach, which is a combination of risk-return portfolio optimization under liquidity constraints. Cryptocurrencies are included in portfolios formed with stocks of the S&P 100, US Bonds, and commodities. We illustrate the importance of the liquidity constraints in an in-sample and out-of-sample study. LIBRO improves the weight optimization in the sense that it only adds cryptocurrencies in tradable amounts depending on the intended investment amount. The returns greatly increase compared to portfolios consisting only of traditional assets. We show that including cryptocurrencies in a portfolio can indeed improve its risk–return trade-off.

Michel Rauchs, Garrick Hileman

The world of money and finance is transforming before our eyes. Digitised assets and innovative financial channels, instruments and systems are creating new paradigms for financial transaction and forging alternative conduits of capital. The Cambridge Centre for Alternative Finance, since its founding in 2015, has been at the forefront of documenting, analysing and indeed critically challenging that digital financial transformation. This Global Cryptocurrency Benchmarking Study is our inaugural research focused on alternative payment systems and digital assets. Led by Dr Garrick Hileman, it is the first study of its kind to holistically examine the burgeoning global cryptocurrency industry and its key constituents, which include exchanges, wallets, payments and mining. The findings are both striking and thought-provoking. First, the user adoption of various cryptocurrencies has really taken off, with billions in market cap and millions of wallets estimated to have been ‘active’ in 2016. Second, the cryptocurrency industry is both globalised and localised, with borderless exchange operations, as well as geographically clustered mining activities. Third, the industry is becoming more fluid, as the lines between exchanges and wallets are increasingly ‘blurred’ and a multitude of cryptocurrencies, not just bitcoin, are now supported by a growing ecosystem, fulfilling an array of functions. Fourth, issues of security and regulatory compliance are likely to remain prevalent for years to come. I hope this study will provide value to academics, practitioners, policymakers and regulators alike. We thank Visa very much for its generous support of independent academic research in this important area.

Yossi Gilad, Rotem Hemo, Silvio Micali, Georgios Vlachos · 5 authors

Algorand is a new cryptocurrency that confirms transactions with latency on the order of a minute while scaling to many users. Algorand ensures that users never have divergent views of confirmed transactions, even if some of the users are malicious and the network is temporarily partitioned. In contrast, existing cryptocurrencies allow for temporary forks and therefore require a long time, on the order of an hour, to confirm transactions with high confidence. Algorand uses a new Byzantine Agreement (BA) protocol to reach consensus among users on the next set of transactions. To scale the consensus to many users, Algorand uses a novel mechanism based on Verifiable Random Functions that allows users to privately check whether they are selected to participate in the BA to agree on the next set of transactions, and to include a proof of their selection in their network messages. In Algorand's BA protocol, users do not keep any private state except for their private keys, which allows Algorand to replace participants immediately after they send a message. This mitigates targeted attacks on chosen participants after their identity is revealed. We implement Algorand and evaluate its performance on 1,000 EC2 virtual machines, simulating up to 500,000 users. Experimental results show that Algorand confirms transactions in under a minute, achieves 125x Bitcoin's throughput, and incurs almost no penalty for scaling to more users.

Shi-Feng Sun, Man Ho Au, Joseph K. Liu, Tsz Hon Yuen

No abstract is available for this record.

Usman W. Chohan

The aim of this chapter is to situate blockchain-based governance tools within a public value (PV) context, arguing that public governance on the blockchain requires elements of a “public value mindset,” which is comprised of transparency, efficiency, stakeholder salience and participation, innovative thinking, decentralization, and trust. To illustrate this PV mindset, the chapter analogizes the powerful solution put forth by cryptocurrencies towards the “double spending problem,” an issue that had once plagued electronic money, by arguing that the manner in which the double-spending problem was solved by blockchain technology (as best embodied by cryptocurrencies) also offers lessons for public governance on the blockchain, specifically in terms of the PV elements enumerated above. By elucidating the nature of the double-spending problem and the revolutionary solution offered by cryptocurrencies, the chapter advocates for a similar approach in the application of blockchain technologies to public management and governance.

Usman W. Chohan

No abstract is available for this record.

Stefan Dziembowski, Lisa Eckey, Sebastian Faust, Daniel Malinowski

Payment channels emerged recently as an efficient method for performing cheap micropayments in cryptocurrencies. In contrast to traditional on-chain transactions, payment channels have the advantage that they allow for nearly unlimited number of transactions between parties without involving the blockchain. In this work, we introduce Perun, an off-chain channel system that offers a new method for connecting channels that is more efficient than the existing technique of ``routing transactions'' over multiple channels. To this end, Perun introduces a technique called ``virtual payment channels'' that avoids involvement of the intermediary for each individual payment. In this paper we formally model and prove security of this technique in the case of one intermediary, who can be viewed as a ``payment hub'' that has direct channels with several parties. Our scheme works over any cryptocurrency that provides Turing-complete smart contracts. As a proof of concept, we implemented Perun's smart contracts in Ethereum.

Joerg Osterrieder, Stephen Chan, Jeffrey Chu, Saralees Nadarajah

We analyze statistical properties of the largest cryptocurrencies (determined by market capitalization), of which Bitcoin is the most prominent example. We characterize their exchange rates versus the U.S. Dollar by fitting parametric distributions to them. It is shown that returns are clearly non-normal, however, no single distribution fits well jointly to all the cryptocurrencies analysed. We find that for the most popular currencies, such as Bitcoin and Litecoin, the generalized hyperbolic distribution gives the best fit, while for the smaller cryptocurrencies the normal inverse Gaussian distribution, generalized t distribution, and Laplace distribution give good fits. The results are important for investment and risk management purposes.

David Lee Kuo Chuen, Li Guo, Yu Wang

Bitcoin was the first cryptocurrency to use blockchain and has been the market leader since the first bitcoin was mined in 2009. After the birth of Bitcoin with the genesis block, more than 1,000 altcoins and crypto-tokens have been created, with at least 919 trading actively on unregulated or registered exchanges. This entire class of cryptocurrencies and tokens has been classified by some tax authorities as having the same status as commodities. If cryptocurrency is viewed in the same class as commodities, how different is it in terms of its risk and return structure? This article sets out to help readers understand cryptocurrencies and to explore their risk and return characteristics using a portfolio of cryptocurrency represented by the Cryptocurrency Index (CRIX). Substantial discussions are centered on Bitcoin and its close variants. Some questions are raised about the potential of cryptocurrencies as an investment class. Results show that the return correlations between cryptocurrencies and traditional assets are low and that adding CRIX returns to a traditional asset portfolio improves risk–return performance. Sentiment analysis also indicates the CRIX has a relatively high Sharpe ratio. Although we should view the results with care, a new form of financing for cryptocurrency and blockchain start-ups is born. The disruption brought about by Bitcoin may be felt beyond payments through what is known as initial crypto-token offerings or initial token sales. <b>TOPICS:</b>Currency, risk management, performance measurement, mutual funds/passive investing/indexing

Guglielmo Maria Caporale, Luis A. Gil‐Alana, Alex Plastun

This paper examines persistence in the cryptocurrency market. Two different long-memory methods (R/S analysis and fractional integration) are used to analyse it in the case of the four main cryptocurrencies (BitCoin, LiteCoin, Ripple, Dash) over the sample period 2013–2017. The findings indicate that this market exhibits persistence (there is a positive correlation between its past and future values), and that its degree changes over time. Such predictability represents evidence of market inefficiency: trend trading strategies can be used to generate abnormal profits in the cryptocurrency market.

Garrick Hileman, Michel Rauchs

The first global cryptocurrency benchmarking study presents a systematic and comprehensive picture of a rapidly evolving industry, illustrating how cryptocurrencies are being used, stored, transacted and mined. The study gathered non-public data from more than 100 cryptocurrency companies and over 30 individual cryptocurrency miners in 38 countries around the world via secure web-based questionnaires, capturing an estimated 75 per cent of the cryptocurrency industry. The study breaks down the cryptocurrency industry into four key sectors – exchanges, wallets, payments and mining. Key findings and highlights from the study include our estimate that over three million unique individuals are actively using cryptocurrency today, data on regulation and compliance practices and costs at firms, and a global map of cryptocurrency mining.

Shaen Corbet, Andrew Meegan, Charles Larkin, Brian M. Lucey · 5 authors

No abstract is available for this record.

Ardit Dika

Ethereum represents the second generation of blockchain technology by providing\nan open and global computing platform which allows the exchange of cryptocurrency\n(Ether) and the development of self-verifying smart contract applications.\nSmart contracts present a foundation for possessing digital assets and a variety of\ndecentralized applications within the blockchain area. Ethereum and smart contracts\nare public, distributed and immutable, as such, they are prone to vulnerabilities\nsourcing from simple coding mistakes of developers.\n\nMotivated by the security breaches and recurring financial losses in smart contracts,\nwe aim to advance the field of security in smart contract programming.\nThe main objective is to aid smart contract developers by providing a taxonomy of\nall known security issues and by inspecting the security code analysis tools used\nto identify those vulnerabilities. Based on previous research as well as attacks on\nEthereum smart contracts, we propose an updated taxonomy which categorizes\nall known vulnerabilities within their architectural and severity level. Our second\nproposed taxonomy is a novel categorization of security tools on Ethereum.\n\nFurthermore, we conduct the investigation of security code analysis tools on\nEthereum by assessing their effectiveness and accuracy. In particular, we analyze\nfour security tools, namely, Oyente, Securify, Remix, and SmartCheck. The results\nindicate that there are overall inconsistencies between the tools on different security\nproperties. SmartCheck outperformed the other tools in terms of effectiveness,\nwhereas Oyente performed the best in terms of accuracy. Furthermore, based on\nthe limitations we identified, we propose future improvements within the user interfaces,\ninterpretation of results, and additional vulnerability checks.

Ting Chen, Xiaoqi Li, Ying Wang, Jiachi Chen · 8 authors

The gas mechanism in Ethereum charges the execution of every operation to ensure that smart contracts running in EVM (Ethereum Virtual Machine) will be eventually terminated. Failing to properly set the gas costs of EVM operations allows attackers to launch DoS attacks on Ethereum. Although Ethereum recently adjusted the gas costs of EVM operations to defend against known DoS attacks, it remains unknown whether the new setting is proper and how to configure it to defend against unknown DoS attacks. In this paper, we make the first step to address this challenging issue by first proposing an emulation-based framework to automatically measure the resource consumptions of EVM operations. The results reveal that Ethereum's new setting is still not proper. Moreover, we obtain an insight that there may always exist exploitable under-priced operations if the cost is fixed. Hence, we propose a novel gas cost mechanism, which dynamically adjusts the costs of EVM operations according to the number of executions, to thwart DoS attacks. This method punishes the operations that are executed much more frequently than before and lead to high gas costs. To make our solution flexible and secure and avoid frequent update of Ethereum client, we design a special smart contract that collaborates with the updated EVM for dynamic parameter adjustment. Experimental results demonstrate that our method can effectively thwart both known and unknown DoS attacks with flexible parameter settings. Moreover, our method only introduces negligible additional gas consumption for benign users.

Alex Biryukov, Dmitry Khovratovich, Sergei Tikhomirov

No abstract is available for this record.